Impulsive Buying Behavior in City Shop Dissertation

Impulsive Buying Behavior in City Shop Dissertation

Center of International Programs
International Cultural Exchange School
Donghua University
Undergraduate Research Project:
Motivations for impulsive buying behavior and the effective marketing strategies selling grocery products
Case: CITY SHOP
By: Ilja Khanan
Nationality: Germany
Major Business Administration
Student ID: 113110246
Supervisor: Nikola Zivlak
Date: June 2014
Abstract
For over sixty years, marketers and consumer researchers have studied Impulsive-buying behavior. Today, 30 to 60% of all purchases are impulsive in the USA (Crawford & Melewar 2003) for different product categories and it is considered to have a $4.2 billion annual volume. That’s why it is becoming more important for marketers to understand how people can be influenced when shopping in order to increase revenues and profits. Millions of dollars are spent on in-store marketing efforts. Over the years, different models have been created for marketers to better understand the key drivers that lead to impulsive buying. This dissertation is written for the retailer or marketer who will adjust their marketing strategies to capture the opportunities of the consumer impulse purchases. This dissertation focuses on City shop and the strategies they use to encourage impulsive buying behavior. The thesis will cover the following topics in regard to impulsive buying:
- Factors and influences that lead to impulsive buying behavior?
- The different promotional approaches used by marketers?
- What personal traits influence consumers to buy on impulse and what is the behavioral process of consumers?
Hopefully this dissertation will be useful for different retail stores, marketing managers and marketing graduates of China for understanding the implementation of impulsive purchasing.
Key words: Impulsive buying, Marketing strategies, Customer Psychology and City Shop.
关键词:冲动性购买,市场营销策略和顾客心理。
摘要
对于年过六旬,营销人员和消费者的研究人员研究了脉冲 - 购买行为。今天, 30至60 %的购买冲动是在美国(克劳福德及2003 Melewar )针对不同的产品类别,它被认为有耗资42十亿每年出版一卷。这就是为什么它正变得越来越重要,营销人员要了解人们如何能以增加收入和利润购物时的影响。宝洁公司花费数百万美元在商店的营销工作。多年来,不同的模型已经建立的营销人员更好地了解导致冲动性购买的主要动力。本论文的零售商或营销谁就会调整自己的营销策略,以捕捉消费者冲动购买的机会写。它将侧重于零售商店,如城市开店,年轻的明星和便利店谁卖低价产品,将涵盖以下内容:
- 导致冲动性购买行为的因素和影响?
- 用营销的不同的促销方式?
- 什么样的个人特质影响消费者购买冲动,什么是消费者的行为过程?
希望本文将针对不同的零售商店,营销经理和中国的市场营销专业毕业生了解冲动购买的实施是有用的.
Contents
Abstract………………………………………………………………………….....2
摘要...........................................................................................................................2
Acknowledgement………………………………………………………………....6
Chapter One: Introduction…………………………………………………….…7
1.1 Background……………………………………………………………….…...7
1.2 Problem Statement……………………………………………………………8
1.3 Aim and Research question…………………………………………………..8
1.4 Research Plan…………………………………………………………………9
Chapter Two: Literature Review………………………………………………..10
2.1 Introduction…………………………………………………………………..10
2.2 Overview of literature reviews……………………………………………..11-12
2.3 Models explaining impulsive buying behavior............................................13-17
2.4 Factors that affect impulsive buying……………………………………….18-20
2.5 Cultural dimensions of China ……………………………………………...20-23
2.6 What motivates impulsive buying?...............................................................23-25
2.7 Difference between compulsive and impulsive shopping…………………25-26
2.8 Cues that trigger impulsive buying………………………………………...26-27
2.8 Summary…………………………………………………………………….27-29
Chapter Three: Marketing Strategies…………………………………….…......30
3.1 What products undergo the most impulsive buying?……………………..30-31
3.2 Techniques marketers use to attract impulsive buying………………...…31-33
Chapter Four: Research Methodology…………………………………………….34
4.1 Questionnaires and Interview...………………………………………………..34
4.1.1 Research Sample………………………………………………………….35
4.1.2 Questionnaire Design……………………………………………………..35
4.1.3 Data Analysis Technique………………………………………………....35
Chapter Five: Findings and Analysis of City Shop……………………………….36
5.1 Introduction……………………………………………………………………..36
5.2 Analyzing the place of consumption……………………………………..…36-38
5.3 Demographics……………………………………………………………….….39
5.4 Observations made at City shop…………………………………………....39-41
5.5 Analyzing the behavior of consumers……………………………………...41-42
5.6 Customer Survey……………………………………………………………42-49
5.7 Interviewing Customer Service Director of City Shop…………………...50-52
Chapter Six: Discussion………………………………………………………..53-57
Chapter Seven: Summary and Recommendation……………………………….58
7.1 Summary……………………………………………………………………58-59
7.2 Recommendations……………………………………………………….…60-61
References………………………………………………………………………62-64
Appendixes……………………………………………………………………….65
Appendix 1 Survey Questionnaire (English version)……………….…...65-67
Appendix 2 Survey Questionnaire (Chinese Version)……………..…….68-71
Appendix 3 Company´s interview Questions……………………….…..….72
Declaration of Originality…………………………………………………..….73
Authorization to lend and reproduce the Thesis…………………………..…74
Acknowledgement
I would like to express my gratitude to the following people that helped me write this essay over a period of four month:
First of all, my former teacher and theses supervisor, Nikola Zivlak, who offered a lot of valuable advice and guidance from the initial to the final stage. In the course of my research, Nikola advised me on the theses outline and I had the chance to spend a lot of time with him discussing and preparing all the material in detail.
Secondly, I would like to thank all of my former professors who taught me from September 2011 until June 2013 in my studies for major: Business Administration. Nikola Zivlak (Business in Emerging Markets, International Business, Doing Business with China and Europe, International Trade), Mr. Anselm (Introduction to Business, Innovation and entrepreneurship), Marko Ljubicic (International Business), Sylvain Gauthier (Macroeconomics, Management Essentials), Robert Ioane (Computer Applications for Business, Management Information system, Strategy Management), Gregory Bardes (Microeconomics), Naeem Faraz (Fundamental Math and Math to commerce), David van Brecht (Principles of Accounting and Managerial Accounting), Kathleen Bell (Statistics and Research Methodology class), Robin Tabbers (Essential of Business law in China) and last but not least Miguel Cerna (Organizational Behavior).
Chapter One: Introduction
1.1 Background
The volume of Impulsive buying has been growing for several years mainly due to an abundance of products in different categories and marketers have been exploring for new ways to promote impulsive buying, this makes the topic interesting to study. Most of the studies on impulsive buying came from managerial and retailer interests. The emphasis was mainly placed on classifying products into impulsive and non-impulsive item. This would help create new marketing strategies such as point-of-purchase advertising, merchandising or in-store promotions. These researches helped understand the link between impulsive buying to unplanned purchasing, however they didn’t identify the internal psychological states, which underlie consumers impulsive buying episodes. In 1993, Researchers Hoch and Loewenstein redefined impulsive buying as: “when a consumer experiences a sudden, often powerful and persistent urge to buying something immediately.” They also explained the impulsive buying to be a struggle between psychological forces of desires and willpower. They have also examined the mood-impulsive buying relationship, the relationship between affective states, in-store browsing and impulsive buying and other major influences on impulsive buying. With the increasing number of Internet users, more and more online stores are opening and having a profound impact on retails stores. The Internet seems as a convenient shopping channel and can be seen as an alternative impulsive (Jones, Reynolds, Weun & Beatty, 2003) channel (Phau and Lo, 2004).
1.2 Problem Statement
Take a look around and you will probably notice a lot of products you bought but never use. For example exercise equipment, unworn clothes, kitchen appliances etc. What are the reasons you have bought them in first place if you never actually make use of them? Often times you will find your unconscious mind driving this immature behavior. Evolutionary influences and techniques used by retailers make it even harder to avoid the temptation of buying something you believe will do you good. As children, we are taught that new products are used, as rewards for stimulating our mood and making us feel better, even if we don’t really need it.
1.3 Aim and research question
The aim of my research paper is to understand the motivation behind impulsive buying as well as determine tools and strategies marketers can use to attract more impulsive buying for their products. This thesis will aim to answer the following questions:
* What motivates people to buy on impulse?
* What kind of techniques and strategies can marketers use to promote their products to impulsive buyers?
* What products undergo the most impulsive buying decisions?
* Understanding Chinese Society and consumer traits with regard to Impulsive buying
1.4 Research Plan
The research plan for this paper was conducted using two common methods. Firstly, academic literature on this topic was reviewed on theoretical models and theories from the past. This information was analyzed and the most important information further elaborated. Secondly, primary data was collected from several CITY SHOP stores, where a lot of impulsive buying tends to take place. Interviews with customers and the Customer Service Director in Shanghai were also conducted. Both secondary academic literature and primary research was essential for a good dissertation to be conducted.
Chapter Two: Literature Review
2.1 Introduction:
The following Literature review in based on existing theories about impulsive buying tendencies and strategies marketers have been using since the 1950s. At first it shows an overview of researches made since the 1950´s, with a primary emphasis placed on 21st century findings. Than it discusses the models that explain impulsive buying behavior, how it should be regarded and the steps involved from a marketer and consumer perspective. It also underlines models of consumer buying processes, the emotional shifts that affect buying decisions, online impulsive buying, pros and contras of impulsive buying and the difference to compulsive buying, as well as innovations that make impulsive buying easier. Several theoretical models used by economist and psychologists are also included in this review for a better understanding of this topic.
2.2 A Brief Overview of Literature Review since the 1950s and today
1950s
* In 1950 Clover was first to study the impulse buying mix and pointed out that some product categories are more sold on impulse than others.
1960s
* Stern 1962 Defined impulse buying behavior by classifying as planned, unplanned, or impulse, also suggested that some product-related factors that might predict impulse buying.
* Kollat and Willett 1967 argued that consumer’s characteristics and demographics influence the impulse purchases.
1980s
* Weinberg and Gottwald 1982 Emphasized that Impulse buyers show greater emotions such as amusement, enthusiasm, and joy and delight when compared to planned buyers.
* Rook and Hoch 1985 Argued that impulsive shoppers tend to enjoy shopping more and the impulses is the result of consumer’s sensation and perception driven by the environmental stimulus.
* Rook 1987 Introduced the concept of consumer impulsion as a lifestyle trait, which can be linked to materialism, sensation seeking and recreational aspects of shopping.
* Iyer 1989 Described impulse buying as a special case of unplanned buying.
* Abratt and Goodey 1990 suggested that in-store stimuli such as POP posters could increase impulse buying behavior.
1990s
* Piron 1991 Defined impulse purchase based on four criteria-Impulse purchases are unplanned, decided “on the spot”, stem from reaction to a stimulus and involve either a cognitive reaction, or an emotional reaction, or both.
* Hoch and Loewenstein in 1991 observed that it is people and not the product that experiences the urge to consume on impulse.
* Rook and Gardner 1993 defined impulse buying as an unplanned purchase that is characterized by relatively rapid decision-making, and a subjective bias in favor of immediate possession.
* Rook and Fisher 1995 Introduced impulsiveness as a personality trait and defined as consumer’s tendency to buy spontaneously, non-reflectively and immediately.
* Dittmar et.al, 1995 Found that gender influences the impulse buying and purchase of a product impulsively could be motivated by the self concept.
* Puri in 1995 developed a two-factor cost-benefit accessibility framework
* Beatty and Ferrell 1998 formulated the definition of Impulse buying as a sudden and immediate purchase with no pre-shopping intentions either to buy the specific product category or to fulfill a specific buying task.
* Wood 1998 stated that a socio-economic factor of individuals such as low levels of household income indulges into impulse buying.
* In 1998 Churchill and Peter created the model of the consumer buying purchasing by putting it in five steps.
* Bayley and Nancarrow 1998 Suggested that impulse buying behavior is a complex buying process and the rapid decision process during shopping, prevents deliberate consideration of alternative information and choices.
* In 1999 McGoldrick proposed the environment-shopper relationship.
21st century
* Dholakin in 2000 proposed a theoretical framework on impulsive buying
* Hausman 2000 proposed that shopping experience might encourage emotions such as feeling uplifted or energized. Consumers shop not only to buy but also to satisfy their different needs.
* Youn and Faber 2000 suggested that both positive and negative feeling states of consumer are potential motivators for impulse buying.
* Kacen and Lee 2002 Described that cultural forces could impact impulse purchasing of Individuals. People having Independent self-concept engage more in impulse buying.
* Kim in 2003 modified Churchill and Peters model of 1998
* Zhou and Wong 2003 Found that retail store environment could affect the impulse buying.
* Jones et, al. 2003 Empirically tested that product-specific impulse buying is affected significantly by product involvement and it is an important factor supporting impulse buying tendencies.
* In 2004 Koski stated the his view on primary factor influencing impulsive buying
* Luo 2005 has found that the presence of peers increases the urge to purchase, and that the presence of family members decreases it.
* Verplanken in 2005 proposed that negative rather than positive affect is a driving force behind chronic impulse buying. The impulse buying could further result in curing negative state of mind.
* In 2005 Wu discussed how impulsive buying differs from compulsive or excessive buying.
* Peck and Childers 2006 Found that touch increases impulse purchasing as the distance between product and consumer decreases (proximity). Suggested that point-of-purchase signs, displays, and packaging encouraging product touch may increase impulse purchasing.
* Mattila and Wirtz 2008 Found that store environmental stimuli such as social factors (perceived employee friendliness) positively affect impulse buying behavior.
* Silvera in 2008 studied the impact of emotions and inferred that impulse buying is influenced by the ‘affect’ or emotions of the consumer.
* Gupta in 2009 demonstrated his view on factors that affect impulsive buying.
* Harmancioglu et.al, 2009 were the first to study Impulse buying of new products and suggested in case of new product: product knowledge, consumer excitement and consumer esteem – drive impulse buying behavior.
* Yu and Bastin 2010 Hedonic shopping value of an individual lead to impulse purchases and are inextricably related to each other.
* Sharma in 2010 studied the variety seeking behavior of impulse buying. They found the variety-seeking individuals are more prone to impulse purchases.
* Rao in 2010 cites four types of impulsive purchases: Pure, suggestion, reminder and planned impulse.
* Chang in 2011 observed that the positive emotional responses of consumer to the retail environment result in impulsive purchases.
* In 2012 Silvera identified four major categories that affect impulsive buying.
2.3 Models explaining impulsive buying behavior
* In 1991 Hoch and Lowenstein created the reference point model, which stated that people are more concerned with the benefits of immediate gratification than monetary issues. These situations include physical proximity, temporal proximity and social comparisons, which justify impulsive buying behavior. It mainly emphasizes on consumers perception of the product and the shift in the consumers reference point. The downside of this theory is that it doesn’t explain the reason why some product categories are bought impulsively, while others are not.
* In 1995 Dittmar made the assumption that consumers not only buy products for their functional use but for the symbolic meanings. Consumers today want to express their social standing, wealth and social status more than ever. This model predicts an individual´s materialism, degree of self-discrepancies and compulsive shopping tendencies, which all predict what types of products one would likely buy. In his research, it was found that men tend to buy products that are more functional, while women purchase products that express their appearance and emotional concerns. He also provided a more comprehensive theoretical model that is made up of self-completion, materialism and self-discrepancy theory. Self-discrepancy is the difference between how one sees him and how one wish to be seen. People therefore tend to purchase products as a self-completion strategy.
* In 1996 Puri developed the two-factor cost-benefit accessibility framework. The research concerned impulsiveness, self-control and a hedonic framework to which an individual feels an urge to buy a product when they are exposed to it. Urge and impulsiveness tend to be high when the benefits outweigh the costs. In contrast, when the costs of impulsiveness outweigh the benefits, the urge to buy on impulse declines.
* In order to understand why people choose one product over another and how they make these choices and how companies utilize this knowledge to their advantage. Churchill and Peter (1998) have made up a model of the consumer buying process, including five steps: need recognition, information search, alternative evaluation, purchase decision and post-purchase evaluation. They also found that consumer impulsive buying behavior is primarily influenced by social, marketing and situational factors. Their culture, subculture, reference group, family, reference group, in-store environment, social surrounding and momentary moods etc. influence the consumer’s opinion, feeling and action. Also in 1998 (Beatty and Ferrell) stated that impulsive buying is a sudden and immediate purchase with no pre-shopping intentions either to buy the specific product category or to fulfill a specific buying task. The behavior occurs after experiencing an urge to buy and it tends to be spontaneous and without making a clear reflection. It does not include the purchase of a reminder item, which is simply an item out-of-stock at home.
* In 1999 McGoldrick proposed a model, which described environment-shopper relationships. According to his model there are two factors, which determine the relationship between the environment and the customer response. This is the customer’s socio-demographic characteristics and his/her cognitive characteristics. For example if there is a time of sales provided by shops, some people will be excited about the cost reductions while others will think of the downsides to this, which is the big crowd and long waiting lines. Thee findings by McGoldrick can only be applied to seasonal sales which limits the understanding.
21st century findings
* In 2000 Dholakia proposed a very accurate theoretical framework on impulsive buying. It consists of the marketing stimuli, situational factors (environment, money, mood) and the impulsivity trait. On or more of these factors can lead to buying impulsively. There are certain constraining factors, which can deter impulsive purchasing. These are money and time, consideration of long-term consequences and negative emotions such as regret. When these factors are present, the consumer will experience conflict whereas when they are not present a customer will buy the product on the spot. In the same year, Hausman stated that impulsive purchasing behavior is a negative definition and one who engages in it frequently is immature, has lack of control, risky and wasteful. Hausman also explained in his findings that the driver to buying goods is of non-economical reasons, such as social and emotional satisfaction, fun and fantasy, which make people ignore the negative consequences of impulsive buying.
* In 2003 Kim has modified Churchill’s and Peter´s model (1998) to describe the impulsive buying process in different steps. There is need recognition, Information search and alternative evaluation and reclassifying influencing factors. In the same year Jones states that when buying on impulse, the consumer makes an unintended, unreflective and immediate purchase. The decisions to buy the product are made inside the store directly after seeing the product.
* Koski in 2004 stated that the main factors for impulsive buying are as follows: Anonymity, wider range of goods, promotions, easy accessibility, (credit cards, internet etc.). Wood in 2005 stated that it is important for retailers to not only care about the purchasing behavior in retail environment but also understand consumer’s society (Characteristics of shopping environment as well as consumer purchasing experience).
* Wu in 2005 has found that impulsive buying differs from excessive and compulsive buying in a consumer motivation. He states that impulsive buying is when a consumer tries to reach a positive effect, creates attention on good proximity and loses self-control. The most important characteristic of impulsive buying is consumer’s response to a stimulus, feeling emotional and having cognitive reactions.
* Mattila and Wirtz (2008) found that store environmental stimuli positively affect impulse buying behavior especially when the store environment is perceived as over-stimulating (excitement and stimulation).
* Gupta (2009) suggested that when size of the store is concerned product display and product prices were the major in-store stimuli in large stores. For small-sized stores, product price was the main factor that attracted impulse purchases. Retail merchandising instantly motivates a consumer to buy a product
* In 2010 (Rao) cites four types of impulsive purchases:
1) Pure impulse: A novelty or escape purchase that breaks the usual common buying pattern
2) Suggestions impulse: A shopper not having pervious knowledge of a product who sees the item for the first time and visualizes a need for it.
3) Reminder impulse: A shopper sees an item and is reminded that the stock at home needs replenishing or recalls, and advertisement or other information about the item and a pervious decision to purchase.
4) Planned impulse: A shopper enters the store with the expectations and intention of making some purchasers on the basis of price specials, coupons.
2.4 Factors that affect Impulsive Buying Behavior:
According to a recent research (conducted in 2012 by Silvera). Consumer behavior and marketing researchers have focused on identifying general factors that increase impulsive buying. They can be classified in four general categories: Consumer characteristics, store environment, situational factors and product characteristics.
1) Consumer characteristics:
* Age: This is a very important factor to consider when predicting impulsive buying behavior Young people generally face fewer risks and will have less regard for monetary issues. It is also found that impulsive buying behavior is highest between the ages of 18-39.
* Gender: According to Dittmar (1995) women are more impulsive shoppers than men and they also tend to have differences to material possession. Men seem to buy more products that are related to leisure and finance for functional reasons while women buy products for emotional and relationship reasons.
* Culture: According to Kacen and Lee (2002) culture has a strong influence on impulsive buying for both regional and individual levels.
* Mood: A person’s mood will strongly affect the desire to buy on impulse. If one is in a good mood, they are more likely to buy on impulse.
* Materialism: Individuals who purchase goods out of a self-completion strategy tend to be more impulsive.
* Shopping Enjoyment: Those who consider shopping, as a form of recreation is more likely to buy on impulse than those who have clear defined buying list.
2) Store Characteristics:
* Store layout: The store layout must be designed in a way that makes it most convenient for the customer.
* Presence of Salesperson: A competent sales team can guide and aid the customers, making it more likely to sell to impulsive buyers.
* Store Atmosphere: Stimulation in shops can be increased through a variety of environmental designs. For example colors such as red, yellow and orange are associated with delightful stimulation. Fast and high-volume music can increase arousal levels and citrus or grapefruit fragrances also increase stimulation levels.
* Store Type: The store type has a strong influence on impulsive buying. In some stores such as grocery stores it usually results in a higher level of impulsive behavior.
3) Situational factors:
* Time: The spare time an individual has for shopping will determine whether they will be impulsive. The more time one has the higher the tendency for impulsive buying behavior.
* Money: Since money increases the purchasing power of individuals it is a major factor and will certainly influence impulsive buying.
* Presence of others: Individuals will more likely buy on impulse when they are seen than when they are alone. Also, people who shop in groups will more likely buy on impulse. (Luo. 2004). On the other hand it can sometimes also lead to fewer impulsive purchases made since this behavior can be viewed as irrational. In this case, they will make the purchase when they are alone.
4) Product characteristics
* Product category: Products can be put into two categories: Hedonic products and functional products. It is found that impulsive buying appears more in hedonic products because of the symbolic meaning associated to it.
* Product Prize: Consumers tend to be more impulsive when there are sales or product discounts, low marginal need for items, short product life cycles, smaller sizes and ease of storage.
2.5 Cultural dimensions of China
The Chinese consumer market is evolving very fast and it is attracting more companies worldwide to promote new brands and products. Advertising on television is considered to be a very important medium in China for reaching customers. But still by far the most effective way to reach customers is through word of mouth. Newspaper ads and sponsorships are other effective ways to target customers. In 2008 McKinsey conducted a study on brands and decision-making by Chinese consumers and have found that 63% of Chinese consumers have only a few preferred brands when planning to buy a product and they are only willing to pay a premium of 2.5% for these branded products. In China it is also very common to make a last minute purchasing decision. 78% of buyers decide in the store what to buy, 37% is easily susceptible to promotions and 22% stick to the idea before entering the store. Therefore the best way to engage people to buy products on impulse is to have effective in-store promotions and competent customer-friendly salespeople.
In regard to Chinese work attitude, their wages have risen steadily over the past two decades and this can explain the shift in ambition, which is linked to the Maslow hierarchy of needs. The most basic needs are increasingly met and Chinese are now dealing more with the upper layers of Maslow’s pyramid. Many Westerners however believe that Chinese workers are all very devoted to their job and like to work. But Gallup states the following contrary statement:
“Workers feel their efforts are insufficiently rewarded and recognized. Few feel that their companies give them good opportunities to engage, learn and develop. The survey in 2004 found that 68% of employees don’t feel engaged, while 20% are actively disengaged which means they are not being productive workers. Only 5% of all workers are happy with their wages, which is not impressive at all.
Chinese people put a lot of importance to the concept of ´face´. To keep up that face many Chinese buy luxury products, even if they don’t have a lot of money. They also prefer buying products in public to be seen well of. Brand and price are important factors to them as well. Li and Su have developed the concept of ´face consumption´. It is defined as follows: “The motivational process by which individuals try to enhance, maintain or save self-face, as well as show respect to other´s face through the consumption of products. Face consumption has three unique characteristics: Obligation, distinctiveness and orientation to the other person.”
From the viewpoint of Li and Su (2004) the new generation ´Y in China is particularly attractive. These are teens and people in their twenties who are much better educated, are open to western ideas and products, read more, use computers and the internet much more than the older generation. It is important to understand that Chinese consumers cannot be classified as one unit but rather as having distinctive consumer types. China has a vast land area with different nationalities, customs and culture, income disparities, infrastructure etc. Many western companies have failed because they didn’t acknowledge that not every Chinese consumer is the same. In 1999 Li and Jing tried to identify different consumer types. Consumers where based into the following elements: Information acquisition, purchasing style, attitudes in life and social and economic factors. They also discovered four common consumer types: 51% pragmatic type, 34% commercialized type, 12% sociable type and 3% conservative type. The pragmatic want to get full value for their money and are solely interested in the functional aspects of the products. The commercialized type are mainly white color young workers with better education (Generation Y). They have a increase brand awareness and basically represent the market economy after the reform period. The sociable type get product information from relatives and friends and are happy with their current life condition. The conservative type wants society to be static and is unwilling to change his or her life. These are older people who believe the times before the reform was better in China.
So, in order to successfully capture Chinese consumers it is important to classify consumers into different consumer types, which have different characteristics. Cities on the coast are better off than western cities and the new generation Y is the most attractive customers. In-store decisions are also made a lot faster in China than in the west and marketers should enhance in-store promotion to sell to impulsive buyers as their income grows. Also the concept of face is very important to Chinese consumers, therefore it should also be taken into consideration when planning ones marketing strategies.
2.6 What motivates impulsive buying?
Some people have a habit of making impulsive purchases and there are numerous traits that reflect its influence. According to Salvira (2012) Impulsive buyers tend to be more social, status-conscious and image-concerned. They also find it more difficult to control their emotions and in many cases we find that impulsively buying something makes them happier. Most people acquire items due to material symbols of personal and social identity.
When we are connected with a product, it changes the way our mind perceives it. This sort of connection is created when we are able to purchase it immediately, when we are close to it, when we are able to touch it or when we see someone using it that we admire. Our minds will act as if we already own the product, and that makes it more difficult to resist buying it. The impulsive buyer also feels that being seen with an expensive new purchase will bring respect and happiness.
There are already some measurement instruments and models of personality that exist.
One, which can be very useful, is the Multidimensional Personality Questionnaire (TQM), which was developed by Tellegen in 1982. It was developed over a period of 10 years. They identified 11 primary personality dimensions. These are wellbeing, social potency, achievement, social closeness, stress reaction, alienation, aggression, control, harm avoidance, traditionalism and absorption. Among these, three dimensions have a particular relevance for the study of impulsive buying? These are Lack of control, stress reaction and absorption.
1) Lack of Control
Conservative people like to plan their activities and they are usually cautious, rational and sensible as well. On the other hand, impulsive buyers are more spontaneous, reckless and careless. They make decisions much faster. They also have less willpower, as they want immediate gratification of their desires.
2) Stress reaction
These are negative emotional states (anxiety, anger, distress and guilt). Stress reaction is caused by tension, jumpiness and worry-process. People, who are stressed, view their emotional responses as unwarranted reactions or as being inexplicable. They are also more vulnerable than ordinary people. This state of mind leads people to engage in behaviors that can provide some relief. Former research shows that a majority of people report to feel much better when they impulsively buy a new product. Impulsive buying behavior can be viewed as a means of coping with stress.
3) Absorption:
It is how customers respond to environmental and sensory cues that effect the purchasing decision. These ultimate factors include: colors, smells, sounds, textures and location. This is a common consumer tendency for being emotionally responsive to engaging sights and sounds, are readily captured by entrancing stimuli, think in images and other experiences, become absorbed in vivid imaginings and experience episodes of expanded awareness and altered states. They all play a crucial role in increasing the likelihood of engaging in impulsive buying. People who have high absorption levels will more easily engaged in impulsive buying.
2.7 Difference between compulsive and impulsive shopping
According to Wu (2005) Impulsive buyers are people who get attracted to a particular product as they shop due to external factors (in-store environment, promotional offer, limited sales, packaging, price etc.). They enjoy the habit of buying something and are easily persuaded to buy something, which might turn out to be an unwise buying decision. However some impulsive buyers plan to buy products unplanned and therefore it is a preplanned act, which is already determined. The amount of purchases made with that mindset can vary according to ones financial standing and mood.
Compulsive buyers on the other hand are people who buy products because they fell stressed or anxiety. It is found that 6 to 7% of the US population has a shopping addiction. Buying new products makes them feel better. These people tend to run into financial difficulties and confusion when shopping. They have a lack of consideration for the possible future consequences as well and are also more concerned about immediate gratification. They also tend to repeat the same irrational buying tendency over and over again. Its almost as if they have an illness which they cant control.
2.8 Cues that trigger impulsive buying
Both positive and negative feeling states can be potential triggers for impulsive buying. These include positive feeling, painful feelings, and feeling fat or depressed. According to Rook and Gardner (1993), mood states tremendously influence buying behavior and cultures have a big impact on impulsive buying behavior as well. The two most important traits of culture are individualism and collectivism. Collectivism is when people associate themselves with a group of similar people and follow on their norms and values; these people can be friends, coworkers or family. Individualist cultures have people who are more independent and see themselves as being autonomous. These people tend to put a lot of emphasis on their personal goals when dealing with other people or relationships. They have a stronger tendency to buy impulsively as people from collective cultures.
Another major factor that leads to impulsive buying according to Rook and Gardner is proximity. Many consumers have stated that they are stimulated to buy items when they see good looking items in stores, catalogues or testing free samples also leads to satisfaction. The effect of impulsive buying will be greater when others are present at the moment of purchasing an item. Customers use that to express their identity and portray a positive fulfilling self-image.
Depending on the social group one belongs to, impulsive buying can have either a positive or negative consequences for the customer. People are motivated by norms and opinions of social groups they belong to. When customer’s peers don’t disapprove to impulsive buying, self-control will determine the outcome. In some groups impulsive buying is seen as irrational and immature, which can lead to negative consequences. Rook (1985), in his studies mentions that most people feel unprivileged when waiting for possession of a new good they wish to have and that results in purchasing a product for immediate gratification of possessing it. When people feel close to the product, it becomes even more difficult to overcome the urgency of buying it.
2.8 Summary
Throughout the year’s scholars, marketers and researchers modified the definition. Some described it as immature and irrational while others argued that it was a way to show ones social position, satisfy ones mood and has an overall positive effect. Wu stated that impulsive buying behavior could have a positive effect whereas compulsive buying behavior has a negative effect on people. This is like comparing a person who appreciates a glass of wine every now and than with someone who is addicted to alcohol and feels bad and depressed if he or he doesn’t drink (compulsive shopper). Impulse buying has been a challenge for market researchers due to its complex nature. Hausman (2000) mentioned that impulse buying is a complicated and multifaceted phenomenon, which accounts for a huge volume of the products sold each and every year. Consumer researchers have mainly focused on identifying the different factors that induce impulse buying in various developed countries (Bayley & Nancarrow, 1998). In the emerging economies, there is a need to study the impulse buying due to recent development in retailing and huge cultural differences when compared to developed economies (Kacen and Lee, 2002). Dramatic increases in personal disposable income, life style and credit availability have made impulse buying a widespread phenomenon across the different retail formats. Creating an attractive physical shopping environment and in-store stimuli is important to enhance the sales through the unplanned buying (Abratt and Goodey, 1990). After the content analysis of the literature, it was possible to clarify the Impulse buying concept, its various dimensions, and its relationship with the consumer. Based upon the “Changing trends of the market in the developing economies”(2012) it is possible to infer that impulse buying may turn into a growing area of research and could be seen across the various forms of retailing.
Based on literature review, the following can be stated on impulsive buying:
1. Females tend to buy more on impulse than men and they buy more hedonic products
2. A lot of literature is repetitive and there are synergies between different models and theories
3. Tendency of impulsive buying is higher in young people than in men
4. There is a direct relationship between “proximately” and “impulsive buying” behavior.
5. People in a positive mood are more engaged to buy on impulse
6. Individualist cultures engage more in impulsive buying than collectivist cultures
7. Primary age group of impulsive buyers are 18 to 39 year olds.
8. Some cultures view it as irrational or wasteful, while others see it as a well social standing.
9. The major constraining factor to impulsive buying is money and time
10. Both positive and negative feelings can be associated with impulsive buying.
11. Hedonic products are bought more on impulse.
Chapter Three: Marketing Strategies
3.1 What products undergo the most impulsive buying?
Some products like cars, washing machines, furniture etc. undergo a long decision process since they are high-priced products and need to be considered wisely before being bought. On the other hand other low-priced good such as candy, clothes, food, small gadgets undergo a fast decision process and are mainly subjects to impulsive buying behavior as they are not planned purchases. We make these decisions all the time and with the abundance of products we have in stores today it is hard to avoid them. So what products undergo the highest impulsive buying behavior? Lets start by defining products usually bought on impulse according to Harmancioglu, 2009.
1) Hedonic products: Products that we don’t really need but are willing to buy because we feel owning them will make us feel happier and better of.
2) Ready-to-use products: Products that can be used instantly.
3) Low-priced products: Have a much higher impulsive buying tendency as most people can afford to buy them and they don’t undergo long decision-making process.
4) Products on sale: People feel they can get a good deal by purchasing these products with a promotional price or add-on feature.
5) Products on display: Products that catch our sight immediately and can be hard to resist.
Table 3.1-Ranking of grocery categories Figure 3.2-Major influences
This is a list of products that undergo the most impulsive buying behavior and the major influences according to the 2008 “Windows on Impulse Shopping” report
3.2 Techniques marketers use to attract impulsive buying?
Impulsive buying has become a very powerful tool for marketers to increase their revenues. It is also partly influenced by external stimuli, which are mostly in the form of promotion. Different vendors use different techniques to attract sales. Not all techniques have the same result but when reading this chapter, it will become clearer on what promotional instruments are best suited to impulsive buying. More people are encouraged by marketers to buy unplanned products due to several strategies and techniques: Price cuts, shelf space allocation, point of purchase displays and in-store positions. Lets look at them in more detail:
1) Price cuts:
This refers to the reduction of price on a particular product. The three primary price cuts are: Pure price cuts, displays and namely feature. Pure price cuts is a when a retailer reduces its prices compared to the normal price. Displays are in-store presentations of a reduced price for a certain product and features are price reductions, which are announced in a leaflet.
2) Shelf space allocation:
The more shelf space is given to a product and the more visible it is, the more likely it is to be sold. Since people are visually orientated and focus on eye level, shelf display can have a tremendous impact on impulsive buying. Supermarkets in particular spent a lot of time handling shelf space allocation. Maybe you have noticed this; the most common sold products in supermarkets such as Milk, Bread, Butter, Sausages, Drinks and candy are placed in the store in a strategic way furthest possible from one another. This gives the consumer the opportunity to cross other products and simultaneously purchase them on impulse. Also at queues at the cash register, candy bars are placed which urge customers to buy them as they are waiting to pay.
3) Loss Aversion Switch
The Loss Aversion Switch is a common tool in-store managers use to make people aware that products are on sale for only a limited time period and that if they don’t buy the product now they will feel guilty later because of higher prices in the future.
Most people would buy the product out of fear that the offer won’t last forever.
Picture 3.1-Loss Aversion Switch
Twisted Heuristics
Most low-priced shopping is done without a lot of comparing; as this would be too time consuming for every product to undergo. Instead people use heuristics, which are rules used by us to make faster decisions that generally work out well. Marketers take advantage of this by packaging up products and selling them in bulk. They offer additional quantity or additional items to bulk products to give customers the impression that it is good value we are getting. Since many people have the desire to save, marketers use that to their advantage. They remind us how much money we can save by buying their products
Picture 3.2-Twisted Heuristics
Chapter Four: Methodology
The findings of this thesis are based on primary and secondary data, which support the topic of impulsive buying behavior in CITY SHOP. This was done through interviews with the customer director of city shop and in-store customers. This research serves to prove some theories that have existed in the market and to measure effective marketing strategies in CITY SHOP. After gaining knowledge about this subject from reviewing and analyzing secondary research, primary research was conducted. It was collected through both qualitative and quantitative research methods. Two methods were utilized in particular: Depth interviews and Questionnaires. Face-to-face in depth interviews with the customer director allowed me to absorb and collect detailed information that I wanted. In order to achieve good results, a mutual cooperation in self-disclosure and trust should exist as well. On the other hand, the structured interview was conducted with the in-store customers.
4.1 Questionnaire
Questionnaires were carried out in order to better understand the motivation behind impulsive buying behavior for CITY SHOP customers. On top of that, the aim of the questionnaire was to identify the effect of marketing strategies used by marketers to promote more impulsive buying behavior in-store. The results helped create a better understanding of impulsive buying behavior from a customer and marketer perspective.
4.1.1 Research Sample
The questionnaire was delivered to 40 CITY SHOP customers, of which 70% were male and 30% female in different age groups. Of those 40 interviewed, there were Europeans, Americans, Chinese and rest Asia. The questionnaire was taken in the middle of the week in the afternoon.
4.1.2 Questionnaire Design
A structured interview was conducted with CITY SHOP customers.16 questions were asked about their personality traits and motivations to buy on impulse in CITY SHOP. The questions were created using some literature review and personal questions of interest that are related to making an impulsive purchase. Each questionnaire took roughly 5 minutes and customers could chose from different options when giving their answer. The Customer Service Director of CITY SHOP was also interviewed for a 20-minute discussion (which was the most time he could spend on it). The questions were recorded since they were open ended. The information was later utilized into the findings of this dissertation.
4.1.3 Data Analysis Techniques
After having collected enough information from customers and store managers, the data was analyzed. Results from the customers were transformed into charts. It was composed of 13 multiple choices they could chose from and there were two open-ended questions as well. A summary of the interview with the customer director is also demonstrated in the findings of this dissertation.
Chapter Five: Findings and Analysis at CITY SHOP
5.1 Introduction
CITY SHOP is the largest chain store in Shanghai dealing in a most extensive range of imported foods and daily necessities from around the world. Up to now, there have been 9 branches in Shanghai located in CBD or high-end residential areas.
Today 80 percent of over 15 thousand commodities in CITY SHOP are imports, with dairy product, meat, and western alcohol and seasoning, chocolate, candy and organic vegetable as featured products. I have been spending a lot of time in the past two month discovering in what ways consumer psychology is influenced by the presence of products, the placement, the environment and other conditions that effect consumer decision making. It’s a technique that marketers use to manipulate the consumer into buying as much as possible. The longer you are inside the store, the more you are likely to spend.
5.2 Analyzing the place of consumption
The first impression you get when walking into CITY SHOP is that there is an elevator you can use if you are a disabled person or if you don’t want to walk down a few steps. This displays comfort and care towards visitors. CITY SHOP also displays some products right at the entrance, which is done to display trust into consumer minds. Once you get to the bottom floor the first section is the alcohol beverage section (I would honestly prefer the fruit/vegetable section to be placed there since its a psychological tool marketers use to remind you of a nice friendly environment and therefore make you stay longer in the supermarket). By the way in retail stores RED means Noticeable, GREEN- Fresh/healthy and BLUE influences our trust hormones. It is proven that most people turn right when entering a retail store. Music played inside the store also plays a key role and influences our behavior. When consumers shop, they tend to follow an algorithm, they tend to walk not up and down the lanes but instead use the perimeter and drop in and out in each of the lanes. The average consumer uses only 25 % of the entire place. Another interesting fact is that when we shop counterclockwise, we generally spent more. Some advanced retail stores nowadays use special eye tracking sunglasses that allow them to see where exactly customers are looking when making their choice. Most are lazy to where they look and humans more often look left/right than up/down. Another method of understanding consumer behavior is placing GPS RFID Chips into the shopping trolley to see the customers walking pathway.
The placement of products plays a vital role in making sure customers walk a long way across the store to find their desired products. This is milk, bread, butter, and meat. They are spread as far as possible from one another to make consumers pass along all the other products and buy on impulse instead of on what they planned to buy. The Baby Food Section for example is considered a very emotional purchase for people and consumers take a long time making their decision, therefore this section is placed away from all other sections to help consumers feel more relaxed and not pressured. Coffee on the other hand is usually placed in the most crowded place right in the center, since customers take time to choose the coffee they prefer, they are standing in the spotlight where they are being observed by other shoppers and workers and this indirectly influences their decision-making process. Sounds creepy but these are all facts.
The Placement of products is interesting to observe. I have found out that the cheaper items are up high and down low the shelves, while the more expensive are on eye level. I am also aware that famous brands are very likely to pay retail stores a lot of money to display their goods in high traffic places. The Kids section and candy is placed on children’s eye level. The checkout line is the ultimate last chance to buy on impulse. Before I believed it would be a good idea to have RFID Scanners that immediately scan all items bought to make it more convenient for customers, reduces costs and avoids accounting mistakes made at the cashier, but that’s not what retailers want, they rather have you buy on impulse the last good before checkout.
Some other techniques marketers use is for example grass smells across the store to make it more natural and environmental friendly. Sales offers like buy 2 get 1 free. Big trolleys usually indicate more buying behavior than smaller ones. There has been a lot of controversy on fruit sale in many supermarkets from customers who claim that there are too much chemical elements added to make fruit seem fresh and shiny. I believe the amount of chemicals that can be used is a debatable topic as well as on the issue of other products that face quality issues.
5.3 Demographic and lifestyle analysis of the Consumer
CITY SHOP targets a specific group of high-end consumers into its retail stores. The general age group is 24 to 40 years olds, high-income earners and those who are educated about the western world. Most have been to western countries before and find some products they can only get at City shop, which makes this retailer so unique. For the time I have spent at CITY SHOP (approximately 12 hours in three visits. I counted up more males than females. Many customers are observant and enjoy spending time there.
5.4 Observations made at CITY SHOP
In order for CITY SHOP to capture our minds and souls when we shop at their outlets, there are several psychological strategies they apply according to my observation and the interview with the customer’s director. We might not notice them but they influence us a lot. These are the following strategies CITY SHOP applies:
1) CITY SHOP clearly wants to keep shoppers happy
2) Periodically change the layout every month
3) More lightning is used for cosmetics
4) Good fragrance and music are made to keep customers in a positive relaxed mood.
5) Ice is used near fish and meat to express freshness
6) Locate common bought items (power items), such as milk, break eggs etc. as far away from each other as possible and usually around the perimeter of the store to have customers walk through other sections and buy on impulse
7) Fruits are well lid and appealing to display the freshness and juiciness of CITY SHOP products.
Picture 4.1-vegetable sector Picture 4.2-inside city shop
8) Complementary products are located next to each other. (Cheese and wine)
9) Convenience sections are created for different people (Vegetarians, mothers, pet owners etc.)
10) Eye level items sell better than higher or lower shelved items, since they are easier to reach.
11) Children made items like candy, toothpaste etc. are placed at children’s eye level in order to make children more aware of them.
12) CITY SHOP made products is placed near branded products at a lower price.
13) End Caps (end of the aisle) feature promotional feature products to make people buy them due to season or declining sales of an item or manufacturing brand pay money for these positions.
14) Major impulsive items such as chocolate, candy, chewing gum, batteries etc. are placed at the cashier.
15) City shop loyalty cards, which help remain customers by offering rewards for store point accumulated.
As we can see CITY SHOP spends an enormous amount of time and money planning the in-store environment carefully, since they understand the importance of this process. These observations can also be made in most grocery stores as they bring in higher profit margins for storeowners.
5.5 Analyzing the behavior of consumers
To further understand consumer buying patterns and decision-making processes we have to look at sales. There is a great sales team working at CITY SHOP whose job it is to understand what sells best and what doesn’t and set the price for products and decide what needs to be taken care of to further increase sales. The entire work they do is reflected on what consumers want. Customers command the sales force in my view.
I would put CITY SHOP consumers into three categories. The first type of consumers buys certain product they cannot find anywhere else and that’s what brings them into city shop. The second types are loyal high-end consumers who buy up to 60% of all groceries in CITY SHOP. The third category of consumers come into CITY SHOP without an idea on what to buy and do a lot of observing and take long time deciding what to buy and are comparing prices.
A lot of CITY SHOP consumers use member cards that count how much you purchase and you can later use the credits earned to get discounts and gifts from CITY SHOP. It’s a great way to remain customer’s loyalty and increase sales. In case you don’t have the membership card in you’re wallet you can simply tell them you’re mobile phone number and they will place the “sales volume points” generated into you’re personal account. Most people pay with union pay credit cards and some who buy only a few items pay cash.
5.6 Customer Survey
40 customers at CITY SHOP in Shanghai were interviewed on 13 questions related to this research for an average of four minutes each. Interviews were done midweeks in the afternoon. Most customers are high-end consumers who are familiar with the western culture and love to buy products that don’t exist in other retail stores across China. A general profile of customers is illustrated in the pie charts below. It includes gender type, age group and Nationality.
The gender and age groups of customers interviewed:
CUSTOMER SURVEY (out of 100% representing 40 respondents)
1) How often do you visit CITY SHOP?
As we can see from the graph, most customers visit CITY SHOP either twice a week or once a week. This indicates that they are loyal customers to CITY SHOP and regularly go shopping there.
2) I usually make a shopping list before going to CITY SHOP?
A few people only stated that they had clear shopping lists made. Most just had a list of general items they wanted to buy in their mind. 2 people out of 20 stated that they always made shopping lists before entering city shop.
3) Do you stick to you’re shopping list?
As we can see there were no people found that completely stick to their shopping list. In fact 70% of customers never stick to a list and end up buying more than they plan.
4) I tend to buy products on impulse?
This graph proves that a lot of customers are impulsive shoppers and there were no customers who never or rarely buy on impulse.
5) I quickly make up my mind when purchasing products?
Most people take 5-10 seconds to make up their mind on a purchase that wasn’t planned. No people were found that took more than 20 seconds to decide whether or not to buy a product
6) I am a price sensitive person?
There were no people who were completely price sensitive as well as none that were never price sensitive. Most people often consider the price though and only buy products they cant find elsewhere in Shanghai.
7) Marketing strategies and promotions in-store influences me?
Most customers seemed to care to some extent on promotions in-store and 45% said they are often influenced by promotions while 10 % are always interested. A mere 5% is never interested.
8) How long do you usually stay at CITY SHOP?
This graph indicates that most people spend 20 to 40 minutes in average at CITY SHOP visit. There were no people who spend more than one hour inside.
9) How much of your overall grocery shopping does CITY SHOP account for?
CITY SHOP products accounts for 30% in average of all grocery products bought. Not a single customer buys more than 75% of grocery items in CITY SHOP and a mere 10% of customers said that city shop accounts for less than 10% of their grocery shopping.
10) How much of the overall grocery purchases are made on impulse?
As this graph demonstrates most customers admit that 10-30% of their purchasing is made on impulse. 20% state that it impulsive buying accounts for 30 to 50% of their purchases and an additional 20% admits that impulsive buying accounts for more than 50% of all made purchases in city shop.
11) What type of impulsive buyer do you see yourself as?
This graph clearly indicates that most people are impulsive buyers to some extent and also see that they are being too impulsive after a shopping session ends.
12) What is you’re Satisfactory level of the CITY SHOP shopping experience?
The general satisfaction level in CITY SHOP is high. Most people say it could make some improvements, but generally they are doing a good job in providing a customer friendly environment which this graph demonstrates.
13) I use city shop loyalty card to benefit from promotions?
As we can see 70% of customers are loyal customers who acquire points from city shops membership benefits. These points can be exchanged for gift products.
Conclusion
People are being greatly influenced by the stores promotional effects, which lead to impulsive buying. CITY SHOP is aware of what consumers think and they try to convince us to stay longer in the store and buy more, especially on Stimulus. With that being said most customers admit that they are impulsive shoppers and it’s hard to avoid the temptation to buy something new, especially in a friendly environment that raises ones satisfaction.
5.7 Interview with Customer Service Director of City shop
The interviewee (Lawrence D’Souza) kindly accepted to be interviewed shortly and talk to me about the general characteristics of CITY SHOP and some of their strategies, which separate them from the competition. Larence D´Souza has been working for CITY SHOP for over three years and had some experience already. He also agreed to make it an unstructured interview, which could also be recorded and to share his personal business card for this report.
Here is a list of questions I was going to ask him:
1. When did CITY SHOP enter China and who is the founder?
2. What is CITY SHOPS competitive strategy?
3. What are the key challenges and issues CITY SHOP is facing?
4. Are new products frequently introduced to CITY SHOP?
5. How much effort is put into advertisement?
6. What are the promotional strategies used by CITY SHOP?
7. What are the characteristics of the layout and effort input?
8. How often is the layout changed?
9. What other psychological tricks are used?
10. Who are the most common foreign visitors and do you target specific ethnic groups, which have a majority of customers visiting city shop in Shanghai?
11. What are some interesting shopping habits you can share?
Summary of the interview
Firstly, Mr. Cui founded CITY SHOP and it started operating in China in 1991. They are dealing in a most extensive range of imported foods and daily necessities from around the world. Their main dedication is providing high-end customers with vast varieties of commodities and first-class service. Today, there are 10 branches in Shanghai located in high-end residential areas. Also 80 % of over 24 thousand commodities in CITY SHOP are imports with dairy product, meat, western alcohol and seasoning, chocolate, candy etc.
CITY SHOP is continually trying to expand its operations in metropolitan cities but also considers opening stores in less developed cities in China with a foreign population. They also have their own advertisement agency, which is critical in raising brand awareness and attracting more customers. Lawrence also stated that about 70% of all city shop customers are foreigners. Most customers use a loyalty card to generate points for receiving various gifts. Lawrence wasn’t able to talk too much about the store layout and environment that makes it appealing for customers but stated that CITY SHOP follows the general supermarket in-store layout scheme. The layout is than changed every month to make customers buy more products on impulse. CITY SHOP also periodically changes the layout and decoration according to season. They have staff on site that control products are neatly shelved and in the right place. CITY SHOP uses CRM System to measure stock of products and use the Just-in-time concept. Since CITY SHOP has a large high quality imported wine section which sells bottles up to 60,000 RMB, there is always a wine expert and advisor present. The key feature the customer manager told me was that there are a lot of customers who walk in and know exactly what they want to buy and where it is shelved. Therefore CITY SHOP changes product location. This can be very disturbing to the customers, but that’s the only ways city shop can sell more impulsive products.
(Business card from the Customer Service Director)
Chapter Six: Discussion
Introduction
Impulsive buying happens more frequently nowadays and it cannot be easily explained. The studies on this topic emerged from marketer and retailer interests, which started in the beginning of 1950s. The aim of most successful store-managers is to make people feel comfortable and stay in store longer. When a customers mood is not good, it is much more difficult to encourage them to buy on impulse. There is a direct link between a customer’s good mood and their willingness to buy in that positive state. If we take a look at some low-involvement products such as chewing gum, chocolate, candy etc. These are products that if properly marketed can lead to large sales, which reflect impulsive buying. Also more low involvement products are being targeted at impulsive shoppers with fancy product characteristics, display and the cool factors.
Different factors play a crucial role; we will discuss the major motivators of impulsive buying in CITY SHOP derived from the questionnaires, the shopping environment according to the interviewee, as well as constraining factors and drawbacks associated.
Major motivators for impulsive buying at City Shop:
From my personal observation made at CITY SHOP and in the academic literature.
Hedonic products, which alternatively trigger emotions, are bought more on impulse than functional products. Women are also more involved in buying hedonic products than men. Low priced products or low-involvement products chocolate, chewing gum, candy undergo more impulsive purchasing than high involvement products such as coffee, wine etc.
From my observation the major motivators for impulsive buying are:
* 1) Mood: Whether one is feeling good or bad greatly affects the decision process. Also if one is with his/her peers or family, they are more likely to buy on impulse than when they are alone. Some people engage in impulsive buying to overcome negative feelings such as stress, anxiety or depression. Other people use it out of a self-completion strategy, meaning enjoying the process and satisfying their mood.
* 2) Personality type: People from individualistic cultures such as USA, Canada, etc. seem to be more prone to impulsive buying, whereas collective culture such as China, Brazil are less engaged in impulsive buying. It is also viewed as irrational is some other cultures such as Ireland, Great Britain and Germany. In Russia or the Middle East however, people regard impulsive buying as a good social standing.
* 3) In-store environment: This includes all promotions used inside the store such as customer service, shelf allocation, sales, pleasant environment etc.
* 4) Product characteristics: A product that is well packaged, allocated and presented will be more likely to sell on impulse. When people feel connected to a product, it will also make it harder to resist the urge to buy something. That’s why hedonic ready to use product sell better on impulse than functional products. The price also effects the buying decision, if the price in the psychology of the customer is suitable than he or she will more likely buy it. A visible product in bulk on sale will also sell very likely. That’s why many brands pay a lot of money for shelf-space allocation.
Shopping environment in CITY SHOP
From the interview with the Customer Director at CITY SHOP, we have found that CITY SHOP places great importance on the shelf layout of products and encourages people to buy products on impulse. The mood of customers is essential; therefore city shop has relaxing music in store, pleasant fragrance, neat product layout and friendly customer service. CITY SHOP has various customers and I would put them into three main categories: The first type of consumers buys certain product they cannot find anywhere else and that’s what brings them into city shop. The second types are loyal high-end consumers who buy up to 60% of all groceries in CITY SHOP. The third category of consumers come into CITY SHOP without an idea on what to buy and do a lot of observing and take long time deciding what to buy and are comparing prices.
Discussing the Customer Surveys
Over 40 CITY SHOP customers were questioned on their buying habits at city shop and the aim was to figure out how prone they are to impulsive buying. Most CITY SHOP customers visit the store twice a month or once a week and 70% use the membership card, which indicates that they are loyal customers. The average person spends 20 to 40 minutes inside the store and the satisfactory level in high. We can confidently say that all people engage in some form of impulsive buying at CITY SHOP since 70% of respondents never stick to their shopping list and only a few occasionally stick to it. 80% of all respondents also admitted that they are strong impulsive shoppers and this mainly when it comes to low-involvement products. It is also clear that promotions inside CITY SHOP influence the buying decision. 30% indicated that promotions occasionally influence their decision, while 45% say it often influences their decision.
Drawbacks associated with impulsive buying
Both positive and negative consequences can be the result of impulsive buying behavior. The negative consequence is that impulsive buying encourages action without carful consideration about its usage and with no regard to potential the consequences that are involved. Often times this result in feeling guilty and unsatisfied. The after-purchase consequences can be negative or positive depending on the impulsive control that person has. A person who initially resisted the impulse and at very last decided to purchase something is more likely to feel guilt that a person that gave in immediately. Other drawbacks associated with impulsive buying:
* Losing control over you’re available budget
* Disrupts the normal way of shopping and no careful analysis of product quality and usage
* Waste of Materials and food
* It destroys ones rational way of thinking and reasoning. You are easily persuaded to buy unnecessarily
Constraining factors to impulsive purchasing:
* Money factor: It is clear that one who has a larger income can afford to engage more in impulsive purchasing than someone who has a small income. Also fewer negative emotions such as regret is seen in high-income earners.
* Time constraint: The reason why people don’t engage as much in impulsive buying as retailers and marketers would hope for is the fact that every person allocates a certain time to his or her shopping and the more time allocated to this task the more impulsive buying will happen.
* Presence of others: Some people don’t enjoy crowded areas to shop and especially in season sales where there are lots of people, they abandon it
Chapter Seven: Summary and Recommendations:
7.1 Summary
Impulsive buying accounts for a large percentage of purchases made today. It is an unplanned purchasing act a customer makes, as they are attracted to a product they like and want to take home. There are different reasons for impulsive buying behavior.
Impulsiveness occurs more in hedonic products than functional products. They tend to be more symbolic products that are consumed in public. This raises people’s self-identity and self-esteem. The in-store environment has a major influence on a customer’s mood and the time he spends in it. This includes the smell, sound, color, setup, and customer service in the store. The longer a customer is in the store and the better their mood, the more likely they are to engage in impulsive buying behavior. Products should be made more visible to persuade customers to buy them and the product should be brought closer to the customer. Other reasons for impulsive buying are lack of control, stress reaction and absorption.
Impulsive buying behavior has been described in different ways. I agree with Beatty and Ferrell (1998) definition of Impulsive buying being a sudden and immediate purchase with no pre-shopping intentions whether to buy the specific product category or to fulfill specific buying tasks. This however doesn’t include the purchase of an item out-of-stock at home. Several respondents at city shop forgot to write some products on their shopping list and when they arrived at city shop they saw the product in shelf and purchased it. It’s important to distinguish this planned purchase from an impulsive buying behavior
Verplanken (2005) stated that impulsive buying has a negative rather than positive effect and that it almost certainly leads to a negative state of mind. I believe that an ordinary impulsive buyer (which is what most of us are) is someone who enjoys buying on impulse every now and than and who doesn’t overspend. Its also fair to assume that both positive and negative feeling states can be motivations for impulsive purchasing. Hausmann in 2000 stated that there are both pros and contras to impulsive buying. The pros are social motivators, emotional satisfaction and fun fantasy. On the other hand, one who engages in impulsive buying is wasteful and has lack of control.
I would like to add to Luo findings in his 2005 research that the presence of peers increases the likelihood for buying on impulse, while family members decreases it. I found the presence of both peers and family to have a strong influence on impulsive purchasing, especially customers accompanied by children will be more engaged in impulsive buying.
Summarizing key points of the Literature review
1. Females tend to buy more on impulse than men and they buy more hedonic products
2. A lot of literature is repetitive and there are synergies between different models and theories
3. Tendency of impulsive buying is higher in young people than in men
4. People in a positive mood are more engaged to buy on impulse
5. Individualist cultures engage more in impulsive buying than collectivist cultures
6. Some cultures view it as irrational or wasteful, while others see it as a well social standing.
7. The major constraining factor to impulsive buying is money and time
8. Both positive and negative feelings can be associated with impulsive buying.
7.2 Recommendations
For Retailers:
Store managers should focus their promotional efforts on targeting impulsive shoppers, who have the tendency to be more open to external stimuli. It is necessary to determine what the customer accepts and to increase the chances of the customer purchasing the product. More emphasis on consumer satisfaction (especially in China) should be placed. It is important to also identify psychological states, which trigger impulsive buying. Understanding the culture and characteristics of people first since this determines how a product should be shelved. China is a large country, which has different cultural groups within the country, and there are similarities as well as differences. As we discussed already, in some cultures buying on impulse is regarded irrational and should therefore be conducted accordingly. New marketing strategies such as point-of-purchase, advertising, merchandising or in-store promotions should also be applied more in retail stores. The most on impulse sold products according to many researchers are hedonic products, which are bought more by women than men. The age groups of most impulsive buyers are 18 to 39 year olds.
The in-store environment must be pleasant and appealing to the customer. More impulsive buying will be encountered as a result of customer satisfaction. The longer a customer stays in the store the more likely they are to purchase on impulse. The use of eye-catching items is another way marketers can increase sales, since people tend to be extremely visually oriented. It is important to note that the general purchasing process must be made simple for the customer. Retailers must place low-involvement products such as chocolate bars, chewing gum, and batteries near the cashier to have a higher chance of selling to impulsive buyers. All products targeted at children should be placed at an eye level. Its is also very important to spread the most common bought items as far away from each other as possible (even in small stores) to make customers glance at other products and possibly purchase them. Also complementary products should be displayed together (for example salsa sauce for nacho chips).
For Customers:
Since we are all engaging in impulsive purchasing whether we like it or not, there are different kind of impulsive buyers. In some cultures, those who engage frequently are often considered irrational, excessive and immature, while in other cultures it is associated with living to ones social standing and is viewed as a good thing. What customers need to realize though are the reasons and motivations for their behavior and to avoid being wasteful and immature. Lets look at some ways customers can avoid buying on impulse.
* Don’t enter the grocery store when you are hungry
* Make a clear defined shopping list and try sticking to it
* Try to observe and compare products and get an idea of competitors prices
* Take time in making the decision and don’t hurry
* Talk to staff if you have any questions or concerns
* Don’t be influenced by other people and try to impress

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